It is well known in the art that businesses have a day sales outstanding. The day sales outstanding for any business will be totaled at the end of a business cycle and will include figures for all sales, transactions, incoming monies, extended credit, lay-overs, etc. applicable to the period of time being measured. The aggregate of these numbers (some of which can be positive and some of which can be negative) represents what can be known as the day sales outstanding. For any organization, the day sales are an important statistic in evaluating the performance of a company.
Trends in the days sales outstanding versus a competitor are typically suggestive to the investment community. For example, when the days sales outstanding is decreasing versus competitors, companies are viewed as premium suppliers and can often negotiate better terms of trade and not require extensive financing. However, when the days sales outstanding is increasing versus competitors, companies may be viewed as losing premier positions within the marketplace with customers placing them in secondary positions to others.
It is known that in evaluating the cash intake of an organization, there are many assumptions made and credits extended that may not ever be paid back. As such, it would be advantageous to quantify not only the inefficiency of the current cash flow systems, but also recognize the individual areas of inefficiency and improve upon those areas to ensure that any inefficiencies are eliminated.